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Minneapolis  Civic&Commefx:e  Association 

A      SUH\rb1Y     OF     THE      EOITPET-      DEBT 

THE     0PxM7-wI0:^     OP  THE      Si.ix.i.G     FUHD 

OF 
MIUisOLAiPOLIS 


By  The 
Bure/u  of    Municipal  Pesearch 
March  27,    Ibii^k-. 


A    S  U  R  V  E  Y 
OF 

A  H  D 
111    5ZEPAT22N  OF  THE  SINKING  FUND 

0  F 

ISl  1111  9.L  MiiiSEAPOLis 

HIS, 

SUGGESTIONS     FOR     A     FINANCIAL     PLAN. 


By  The 
Bureau  of  Municipal  Hesearch 
Of  Tho 
Minneapolis  Civic  and  Commerce  Association 
'^  March  27,    1922. 


AU'7Afir 


■  '  , ,  ;    ;  ••••*»  J'j  I'  ',  I  :. 
In  making  the  folio ving  study  of  tho  uitmi^xpolV^  'Bbntlfed*  Debt 

# 

find  Sinking  Fund  tho  Buror\.u  of  Ifunicipr^.l  RosQ-^.roh  has  boon  influenced  by 

four  factors,  vis:- 

1,  The  City  is  fast  approaching  tho  bonding  limit  fixed  by  ntato 

law  boyond  vfhich  no  bonds  inay  bo  issued. 

Zf  Tho  urgent  need  of  I/iunicipal  inrorovomonta  calling  for  increas- 

ingly larr;o  issues  of  bonds, 

3»  The  inadequacy  of  the  present  Sinking  Fund  to  provide  s\ifficient 

sums   to  anortizG  outstanding  bonds* 

4«  The  need  to  establish  a  sound  financial  policy  for  the  future 

vrhich  v/ill  be  cone  a  part  of  any  City  Charter  that  niay  be  adopted  and 
v/hich  \7ill  as  nearly  as  possible  equalize  tho  burden  of  taxation  and 
continue  to  keop  tho  city  in  a  favorable  position  before  tho  bond- 
buying  public. 

To  this  end  tho  following  facts  havo  been  gathered  and  are 
here  presented  to  tho  City  Officials  and  tho  general  public. 


MINNEAPOLIS  CIVIC   &  COISitJRCii;  .'^SOGIATION 
COM4ITTEE  ON  MUNICIPAL  RESEARCH 

A,     M,  SHELDON,  Chairmn 

R.  G,   BLMCBY  L.  C.  BURR 

E,   J^.COUPER  A.  C.  DA^r^WBAUM 

KiJlL  DeLAITTRE  W.  P^  DSVEREUX 

W,   S,   DV/INNSLL  V;.  A,  EGGLfiSTON 

FRED  L.   GR-^Y  0.   D.  HAUSCHILD 

D.  P.   JONES  J.   R.  KINGMAI^ 
C.   L.  PILLS  BURY  C.J.  RXK?/DOD 

E.  S.   SL/.TER  H.   D.  THRALL 

P.   L.  OLSON,   Director 
J.    T.   HELSOM,Aocountcuir 


SSS987 


*•«     '  *?*•  • 


1  •  •  ^     • 


Chaptor 
1. 


TABLE     OF     CaiTENTS 

HISTORY  OF  MFNT^APOLIS  DEBT  &  SINKING  FUND 
"I.     Definition  of  "Sinking  Fund" 

2.  I:.-   30-Ycar  Bond  Theory 

3.  Shcrr,  porm  Bonds 

4 •     Graph  S ha-r in^  ll  txir it  ios 
5.     Statistical  Tables 

a.   Tablo  of  Gross  Dobt  showing  character 
of  service   or  asset 


Rago 

4 

ft 
7 
8 


11 


b.  Tablo   of  City  Debt  showing  source   of 

payment  ^^2 

c.  Tablo  shCT^ing  years  and  amounts   in  which 

Bonds  will  mature  ^4 

d.  Tabic  showing  interest  due  on  present  debt  15 
II •                  MINIJEAPOLIS  SINKING  FUND  REQUIRE?ffiNTS 

1.  Card  Record  of  Sinking  Fund  j^7 

2.  Sinking  Fund  Balance  &  Shortage  18 

3.  Effect  of  Sinking  Fund   on  Bond  Prices  21 

4.  Limit  of  Bonded  Debt  '  22 

5.  The  3-Mill  Levy  and  Its   Limitations  24 

III.  MODERN  TENDENCIES    IN  MUNICIPAL  FINANCE 

1.  The  New  Jersey  Financial  Code  29 

2.  The   "Pay-as-you-go"   Plan  of  the  City   cf 

Now  York  5% 

3.  Serial  Bonds  &  Their  Relative  Cost  32 

IV.  PROPOSAIS  FOR  THE  FUTURE 

1«     Conclusions  mM 

2,  Possible  Courses  Comprising  Five  Plans 

of  Procoduro  3^ 

3.  The  Recommendation  of  the  Bureau  of  Municipal 

Research  4q 

V.  MINNEAPOLIS   BOND  RECORD. 

1.  Valuation  of  City  Owned  Property  44 

2,  Official  Record   of  All  Bonds   Issued  by  tho 

Citv    of   M-innopnrsI  i  e 


A  e     cf\ 


I,        HISTORY  OF  MTimEAPOLIS  DEPT.  AND  SINKING  FUND 

1,    WHAT  IS_A  SINKING  FUI^D?  .     . 

The  need  for  making,  public  improvements  the  lifei  of  which 
may  extend  over  a  period  of  years  and  oft«^n  into  the  succeeding  generation, 
has  brought  about  the  necessity  of  financing  these  improvements  so  that 
the  burden  of  their  cost  \^ill  be  equally  borne  by  all  the  tax  payers 
deriving  benefit  therefrom.    To  this  end  bonds  are  issued,  pledging 
through  authorized  officials,  the  faith  and  credit  of  the  municipality, 
that  such  debt  will  be  paid  at  its  maturity • 

For  the  purpose  of  equalizing  the  burden  of  paying  the  debt  over 

the  period  of  its  life  and  to  provido  an  adequate  sum  with  which  to  pay  the 

debt  at  its  maturity,  a  certain  equitable  amount  is  to  be  included  in  each 

year's  tax  levy  and  laid  asido  in- what  has  been  termed  a  "Sinking  Fund." 

This  Fund  has  been  defined  as 

"a  Contract  entered  into  ^^rith  the  purchasers  and  holders 
A  of  long  term  bonds,  which  provides  for  the  setting  aside 
from  current  revenue  annual  installments  to  accumulate 
at  interest  in  order  to  amortize  the  loan,"* 

In  the  majority  of  Minneapolis  bond  acts  the  sinking  fund 

provision  is  to  be  found  stated  as  follows:- 

"and  the  City  Council  of  such  city  shall  each  year  include 
in  the  tax  levy  for  such  city  a  sufficient  amount  to  provide 
for  the  pa3Tnent  of  such  interest  as  it  accrues  and  for  the 
ac cumulation  of  a  Sinking  Fund  for  the  redemption  of  such 
bond's*" at  tTierf  maturity .'"^' 

This  sinking  fund  provision  becomes  on  the  issue  and  sale  of 
bonds  a  contract  with  the  bond  holder,  the  obligation  of  which  the 
Legislature  has  no  power  subsequently  to  impair  by  repeal  or  modification 
of  the  sinking  fund  provision.   This  point  has  been  repeatedly  held  by 
the  Federal  Supreme  Court.* 
*  Dillon  -  Mun.  Corp,  4th  Ed. 


tt  WQuUl  9e«m  iher«f or»  lba%  in  eaeh  InstAXB^  trtref*  t)i»  Authorising 
>«it  *ot>  MgpfvSAly  l^rovidea  for  the  lavylo^  of  %  ««rtAUi  mumaI  •«KJtat4riKb0 
K  linking  fund  sufficient  to  p&y  that  isaue  of  bonda  at  its  maiurfiy^  it 
beocmes  standatory  ttf  the  tax  levying  body  to  so  Idvy  and  sot  asldo  oiioh 
sums  for  oach  ^<m^  1mim«  and  that  any  modification  of  such  provisioii  it 
to  be  held  a  violation  of  \9m  by  reascn  of  Supreirta  Court  deoisionot      * 

Whether  it  beoemaa  mandatory  to  levy  equal  annual  sums  to  oreato  a 
sinking  fxind  for  those  issues  of  bonds  where  such  provision  is  pet  so 
expressly  stated  in  the  Bond  Act,  or  whether  payment  may  be  arranged  for  by 
a  certain  annual  tax  levy  sufficient  to  cover  all  suoh  issues^  is  a  point  Q(^  • 
which  there  may  be  diverse  opinion* 

« 

However*  it  may  be  accepted  as  a  fundai[iental  principle  that  tha 
iife  of  the  debt  shall  not  be  longer  than  the  life  of  the  asset  acquired  foy 
which  it  is   issued* 

If  it  is  made  shorter  than  the  oentemplated  iBprovement  or  acquir^i 
asset  aertain  taxpayers  would  derive  a  benefit  for  wTiich  they  have  not  bten 
M0O«8ed;  whereas 4  if  the  life  of  the  debt  is  made  lenyr  than  that  «f  the 
acquired  asset,  the  Capital  Value  of  the  cenmunity  is  \eBsened« 

That  a  clearer  realization  of  this  fundamental  prinaipal  is  btlmg 
held  by  other  states  is  evidenced  by  the  lews  being  written  into  their 
Statutes  classifying  the  various  types  of  bonds  and  the  term  for  whleh 
they  nay  be  issued. 

Notable  among  these  is  the  classification  adopted  in  tha  Nsiw 
Jersey  Code  enatfeed  in  1916  which  appears  elsewhere  in  this  report t 

2,  •  THE  30  -  YEAR  BOND  THEmY. 

Apparently,    it  was  the  original  theory  of  the  framero  Of  the 

Minneapolis  Charter  that  all  bonds  for  public   improvements  such  as  Sohool 

Buildings,  Sewers,  Water  Supply,  Parks,  Bridges  and  other  similar  projecte 

5 


should  bo  financed  on  a  30-year  plan.     Evidence    to  nuppot  this  theory 
has  benn  obtained  through  interviews  vith  public  officials  and  is 
further  shown  by  reason  of  the  fact  that  beginning  v/ith  the  year  1381 
v/hen   interest  ratos  cc.iro  down  to  a  normal  4^  after  the  high  rates  caused 
by  the  Civil  T.'ar,   this  plan  was  strictly  followed  and  a  total  of 
016,000,000   in  30-yoar  bends  was   issued  betv/een  1881  and  1910,     Of  that 
amount  noro  than  six  million  dollars  have  boon  paid. 

Tirj9  has  proved  that  nany  errors  of  judgment  wore  mdo  during 
this  period  in  the  issuing  of  30-year  bonds  for   sliort  lived  iiiiproveincnts. 
For  exanple : 

(a)  In  1887  -  30  year  bonds  for  030,000  v/ere  issued  for  the  con- 
struction of  a  Locloip  which  v;as  abandoned  in  1904  -  13  years 
before  the  bonds  matured . 

(b)  During  the  period  1887-1910,  30  year  bonds  to  an  amount  of 
more  than  02,000,000  v;erc  issued  for   inprovcnonts ,    such  as 
paving,   grading  and  curbing,  which  inprovenents  vrere  of  iiuch 
shorter   life  than  that  of  the  bonds  financing  then  -  causing 
a  burden  of  debt  and  interest  upon  taxpayers  "ssdio  derived  no 
benefit  therefrom, 

(c)  30-year  bond   issues  for   Schools "have  included  funds  used  for 
equipment  such  as  chairs,   desks,  automobiles  and  appliances 
for   laboratory  and  manual  training  work  that  were  worn  out 
or   superseded  by  improved  equipment  many  years  before  the 
bonds  were  redeemed,  again  placing  the  burden  unfairly. 

Note: 

In  this  connection  it  is  to  be  noted  that  each  year  when  budgets 
were  being  considered  representatives  of  the  Bureau  of  Municipal 
Research  have  appeared  before  the  Board  of  Estimate  and  Taxation 
and  protested  against  the  issuing  of  bonds  for  Gchool  Equipment, 
These  protests  have  been  unavailing  until  this  year  when  the 
Board  of  Education  included  in  its  budget  for  current  expense 
an  item  of  s^60,000  for  that  purpose. 


6. 


^ •  SHORT-TISRM  B_OI\irS   IS..UED 

Boginnlng  v/ith  3.911  and  in  nubsequent  years  tho  City  Council 
and  other  Boards   requested  of  the  Legislature  and  \7erG  granted  authority 
to  issue  bonds  for  short  terms  of  5- 7- 19-year s  v«rith  the  result  that   in 
the   period  from  1911  to  1921  bonds  to  tho  ar.ount  of  i^l,287,000  have  been 
issued  and  redeemed,   notwithstanding  the  fact  that  the' character  of  the 
implrovement  for  which  tno  bonds  wore  issued   (i.   e.   Schools,  Water  Supply, 
Parks,   etc*)  warranted  the  issuance  of   longer  term  bonds,  -  causing  a 
heavy  drain  on  the  Sinking  Fund» 

In  1915  boaf"»s  werp  issued  to  the  amount   of  ;S5l,597,500  -  of 
which  all  but  ;i?)500,.000  were   issued  for  a  period  of  12  years  -  causing 
them  to  fall  due  in  1927,       The  reaf^ons  stated  by  City  Officials  for 
issuing  these  short  term  bonds   for  long  lived  improvements  were  that  v/ar 
conditions  had  unduly  inflated  interost  rates  and  the   Legislative  Act 
authorizing  the  sale  of  bonds  had  set   limitations   on  the  rate  of  interest 
to  be  paid  and  the  discount  to  be  accepted,  therefore  bond  buyers  stipu- 
lated that  bonds  be  redeemable  not   later  than   1927.         It  i/as  also 
expected  that  a  lowor  interest  charge  might  be  obtained  by  refunding 
these  bonds   in  1927. 

This  has  served  to  make  1927  the  first   "peak  load"   in  the 
payment   of  bonds,   as  will  be  more  readily  seen  on  the  accompanying  graph* 


7. 


GRAPH  SHCWING  MftfURiriES   -  1922-L945 


8 

O 

o 
to 


o 

8 

CO 


lO 


Othor  peak  loads   occur  in  1939,    1941  awi   1942,   calling  for 
unusually  heavy  drains  upon  the  Sinking  Fund  in  those  years* 

This  condition  and  the  demand  for   issuing  bonds   in  oontin>ially 
increasing  amounts  to  care  for  enlarged  municipal  activities  and  improve- 
ments has  caused  serious  consideration  on  the  part   of  the  City's   financial 
officers  as  to  the  best  method  of  equalizing  the  burden  of  bond  redemption. 
Various  plans  have  been  tried,   somo   of  which  are   illustrated  below, 

(a)  Bonds  have  been  issued  for  shorter  terms  than   the   life  of  the 
improvement  warranted,   -  such  as  Water  Works  bonds  for  |300,000 
issued  June   1913,   payable  in  seven  years \ 

(b)  Serial  Bonds  have  been  issued  -   i.   et  the  whole  amount   of  the 
issue  has  been  made  payable   in  equa.l  annual  installments  beginning 
with  the  first  year   -   such  a  s  Sfchool  Bond^  for  |1,230,'000  issued 
in  July  1921  payable    in  30  annual  amounts   of  .f 4 1,000  each. 

(c)  Issues  have  been  divided  into  irregular  amounts  and  made  payable 
in  non-cons ecutivo  years   in  order  that  the  peak  years  might  be 
missed,    -  such  as  School  Bonds  for  $2,000,000  issued  Dec.   1920, 

(d)  Issues  were  made  payable   in  equal  annual   installments  -  the  pay- 
m.ents  however  to  begin  after  a  number   of  years  had  elapsed     -  such 
as  Funding  Bonds  for  :ipl,000,000  issued  August    1919,  the  first 
payment  to  be  made   in  1925. 

Under  this    latter  method   (d),  an  unnecessarily  large  burden  in 
interest    charges  was  imposed  upon  the  tax  payers  as   shown  by  the. following 
example:    - 

In  1919   it  v/as  found  necessary  to  care  for  a   large  deficit 
in  the  Current  Expense  Fund  caused  by  salary  increases,   etc.  by 
issuing  bonds  to  an  amount   of  | 1,000,000.     This   issue  provided 
that  the  bonds  be  made  payable  in  five  equal  portions   of  i5200,000 
each,  the  first  to  fall  due,  however,   in  1925  -   six  years  after 
the  date  of  issue,   -  and  the  balance   in  equal  portions   in  the 
succeeding  four  years. 

Five  percent   interest   -   or  ^50,000  annually  will  be  paid   on 

this   loan  for  six  years  -  a  total  of  $300,000  -  before  the   interest 

charges  are   reduced.     And  this  on  a   loan  covering  a  deficit    in 

current  expenses  1 

9. 


Hote : 

Prior  to  the  sale  of  the  bonds   referred  to,  the  Gemini. tteo 
on  Municipal  Research  addressed  a  letter  to  the  City  Council   iU  which 
it  was  suggested  that   inasmuch  as  these  bonds  vere   issued  to  laetrt  current 
expenses,  they  should  be  retired  within  the  current  period  as  nea'^ly  as 
possible.        The  Committee  therefore  recoramendod 

1.  That  the  Londs  be   issued  for  a  term  of  not  more  than  five  y'ears. 

2.  That  they  be  Serial  bonds. 

3.  That  they  be  issued  in  installments   of  i^500,000 

4.  That  a  bill  be  presented  to  the  Legislature  providing  for  a 
special   levy  to  produce  rn  amount  sufficient  to  retire  annually 
one-fifth  of  the  principal  and  to  pay  the   interest. 

How  nearly  these  recommendations  were  carried  out  becomes  apparent  fr<M 

the  preceding  paragraph. 


5.  TABLES  SHavING  BaiDED  DEBT. 

On  the  following  pages  will  be  found  tables   showing 

a*       Gross  Debt  -  v/ith   character  of  service  or  asset 

b.       Gross  Debt  -  Sinking  Fund  and  Special  Funds  and  allowable 
deductions  to  show  net  debt. 

©•       Table  of  total  maturities, 

d#        Interest  amounts  payable   on  present  debt. 


10. 


5-a* 


TABLE  NO.    1  SHCMING  GR03S  DEBT  AIJD 


CHARACTER  OF  SERVICE  OR     ASSET. 


CHARACTER  (W^  t-SSUE 

EDUCATION: 
Schools 
Libraries 

HIGHV/AYS  &  BRIDGES 
Street   Iraprovemeuts 

(Paving, Curbing- lateral  sewers) 
Revolving  Fund 
Bridges 

RECREATION: 
Parks  &  Park  ImDrovoments 
Playgrounds  (t  Be.ths 

SANITATION 
I&iin  Sewers 
Comfort  Stations 
Bassetts  Creek  Sewer 

PUBLIC  SERVICE  ENTERPRISES: 
Water 

Fiver  Terminals 
Appraisal   (Street  Railway) 
Electric   Light  Plant 

PUBLIC  WELFARE 
Hospital 
Workhouse 

FUNDING  OPERATION  DEFICITS  AND  REBATES 
Current  Expense 
Tax  Rebates 
Schools 
Election 
Garbage 
Water 

PROTECTI(»f  OF  PERSONS   &  PROPERTY 
Fire  Department 
Police  Departm-^nt 
Armory 

GENERAL  GOVERNI.IENT 
City  Hall 
Voting  Machines 
Sundry  Purposes 


AMOUNT  OF   ISSUE 


%  OF  TOTAL 


Sil3,505,500 
290,000 


9,126,662 

1,650,000 
2,045,000 


$13,795,500    54.68 


12,821,662         32.22 


3,983,680 
235,000 


2,631,000 

50,000 
273,000 


1,750,000 

130,000 

25,000 

50,000 


1,097,500 
115,000 


1,000,000 

200,000 

300,000 

50,000 

33 , 700 

40,000 


317,000 

75,000 

150,000 


450,000 

158,200 

67,000 


4,218,680    10.60 


.  2,954,000 


1,212,500. 


1,623,700 


542,000 


675,200 


7.43 


1,955,000     4.92 


3.02 


4.07 


1.36 


1.70 


$39,798,242   100.00 


11. 


5-b. 


TABLE  KO,   2  SHa/BTG  CITY  DEBT  AFD  f:OUP.CE 


OF  ?AYfl£?]T 


As   of  December  31,    1921 


BONDS   PAYABLE  FRO!:  GLNFXAL  SIIIKIilG  FDTID 


Appraisal  Bonds 
Armory  Bonds 
Baosett's  Croek  Bonds 
Bridge  Bonds 
City  Hall  Bonds 
Comfort  Station  Bonds 
Electric  Li<?;ht  Pi?^.nt  Bonds 
Fire  Department  Bondn 
Funding  Bonds 
Hospital  Bone's 
Library  BcndE 
Hunicipal  Bath  Bonds 
Park  Bends 

Permanont  Improvomont  Bond- 
Park  Playground  Bonds 
Police  Station  Bonrls 
Revolving  Fund  Bonds 
River  Torr.inc-.l  Bonds 
School  Bonds 
SoT7or  Bonds 
Sundry  Bonds 
Tax  Robato  Bonds 
Voting  Ifcichino  Bonds 
Water  Vforks  Ponds 
Workhouse  Bonds 


BOiroS  A!!D  CERTIFICATES   PAYABLE  FRO'i  SPECI/iL  FL^TDS 

City  Hall  and  Court  House  Bonds 

Flection  Doficit  Certificates 

School  Deficit  Bonds 

Garbage  Collection  and  Cremation  Certificates 

Water  Department  Certificates 

Street   Improvement  Certificates 

Park  Acquisition  Oertificaoos 

Park  Cer^ificates  -  Ten  year   plaii 


Gross  Debt  -  December  31,    1S21 


;         25,000.00 

150,000.00 

273,000.00 

2,045,000.00 

50,000.00 

50,000.00 

50,000.00 

317,000.00 

1,000,000.00 

1,097,500.00 

290,000.00 

155,000.00 

2,698,000.00 

2,482,000.00 

80,000.00 

75,000.00 

1,650,000.00 

130,000.00 

13,505,500.00 

2,631,000.00 

67,000.00 

200,000.00 

158,200.00 

1,750,000.00 

115,000.00 

"^7?.44,200.C>0 


400,000.00 

50,000.00 

300,000.00 

33,700.00 

40,000.00 

6,644,662.36 

1,012,719.77 

72,950.00 


8,554,042.13 
^39,798,242.13 


•12, 


5-.b.  TABLE  NO.    2  SHailNG  CITY  DEBT  AND 

SOURCE  OF   PAYKffiNT 

As   of  December  31,    1921. 
(Continued) 


DEDUCTABLE  OBLIGATIOJg^,  AS^  I^  SEC.    1848;   R.   S.    1913 

Revolving  Fund  Bonds  V 1,650, 000. 00 

Water  Works  Bonds  1,750,000.00 

Water  Works  Certificates  40,000.00 

Electric   Lig^t  Plant  Bonds  50,000.00 

River  Terminal  Bonds  130,000.00 

City  Hall  and  Court  House  Bonds  400,000.00 
Street   Improvement  Certifioatos 

Assessed  portions  (2/3  of  Total)  4,711,546.76 
Park  Acquisition  Certificates  - 

Assessed  portions  (2/3  of  Total)  730,001.72 
Park  Certificates  -  Ten  year  Plan  - 

Assessed  Portion 52,000.00 

Total  Deductions ' - 9,513,543.48 

Balance  --    30,284,693.65 

Sinking  Fund,  as  of  December  31,  1921.  2,606,318.20 

Net  Bonded  Debt,  as  of  December  31,  1921. i^  27,678,375,45 


13. 


5c  t 


TABLE  NO.   3  SHavilIG  YT:aRS  AND  AJIOTJNTS    IN  V/FICR 


YEAR 


SINKING 
FUIH) 


SPECIAL 

LEVIES 


GROSS  DEBT 


1922 

S  557,000 

$  807 

,268.01 

1923 

735,500 

655, 

,942.80 

1924 

451,000 

655 

,242.60 

1926 

1,064,000 

557 

,042.80 

1926 

752,000 

556 

,542.80 

1927 

2,182,000 

558. 

,083.54 

1928 

787,200 

•54" 

,793.50 

1929 

772,000 

544, 

,935.00 

1930 

470,000 

537. 

,575.00 

1931 

664,000 

456. 

375.00 

1932 

918,0(X) 

384 

,895.00 

1933 

1,075,000 

384, 

845.03 

1934 

1,090,000 

376, 

275.85 

1935 

777,000 

584, 

545.00 

1936 

577,000 

266, 

475.00 

1937 

1,576,000 

218, 

400.00 

1938 

1,210,000 

159, 

000.00 

1939 

2,635,000 

164, 

000.00 

1940 

1,142,000 

97, 

000.00 

1941 

3, 151, '^00 

46  J 

000.00 

1942 

2,232,000 

1943 

673,300 

1944 

1,505,000 

1945 

697,500 

1946 

807,000 

, 

1947 

775,000 

1948 

409,000 

1949 

935 ,000 

1950 

573,000 

1951 

53,000 

PAID  BY  ASSESS. 
rIENTS  ABAINST 
BENEFITTED 
PROPERTY 


1,364 

1,391 

1,106 

1,621 

1,508 

2,740 

1,330 

1,313 

1,007 

1,120 

1,302 

1,459 

1,466 

1,361 

843 

1,794 

1,369 

2,799 

1,239 

3,197 

2,232 

673 

1,503 

697 

807 

775 

409 

935 

573 

55 


,268.01 
,442.80 
,242.80 
,042.80 
,542.80 
,088.54 
,993.50 
,935.00 
,575.00 
,175.00 
,895.00 
,645.03 
,275.35 
,545.06 
,475.00 
,400.00 
,000.00 
,000,00 
,000.00 
,700.00 
,000.00 
,300.00 
,000.00 
,500.00 
,000.00 
,000.00 
,000.00 
,000.00 
,000.00 
,000.00 


579,693.76 
379,680.87 
378,963.90 
380,484.73 
380,587.76 
381,080.50 
363,971,79 
368,050.26- 
364,793.66 
313,524.70 
266,661.06 
265,848.31 
269,263.23 
239,164,97 
193,629.67 
160,409.98 
120,343.31 
123,951.86 
71,196.49 
37,217.37 


AMOUNT  TO 
BE  PAID 

FROM  genera: 

TAXATION 


t     984,574.25 

1,011,761.93 

727,258.90 

1,240,568.07 

927,955.04 

2,359,008.04 

964,021.71 

948,874.74 

642,781.30 

806,650.30 

1,036,233.94 

1,193,996.72 

1,197,012.62 

1,122,380,03' 

649,845.33 

1,633,990.02 

1,248,656.69 

2,675,048.14 

1,167,803.51 

3,160,482.33 

2,232,000.00 

673,300.00 

1,503,000.00 

697,500.00 

807,000.00 

775,000.00 

409,000.00 

935,000.00 

573,000.00 

53,000.00 


$31,244,200  s^8,554,042.13     v*539,798,242.13     05,441,548.48     $34,356,693.65 


14. 


5-d 


TABLE  NO.   4  SHCMING 
INTEREST  DUE  ON  BONDS  BEGDINING 
WITH  THE  YEAR   1922  AND  ENDING  ^'TiEN 
AU.  PRESENT  BONDS  HAVE  IIATTJRED. 


INTEREST  ON  SINKING 

INTEREST  PAID 

TOTAL 

FUIEi'  BONDS  PAID  OUT  OP 

BY  SPECIAL 

INTEREST 

YE/iJ? 

GENERAL  INTEREST  FUND 
1,345,088.35 

TfiX  LE^/IES 

DUE 

1922               $ 

$     133,988.59 

$  1,479,076.94 

1923 

1,317,008.25 

116,312.43 

1,433,320.68 

1924 

1,289,768.25 

110,059/34 

1,399^827.59 

1925 

1,259,858.25 

93,869.79 

1,358,728.04 

1926 

1,218,428.25 

92,624.02 

1,311,052.27 

1927 

1,143,833.75 

86,470.65 

1,233,304.40 

1928 

1,093,808.25 

79,505.21 

1,173,313.46 

1929 

1,053,690.25 

73,315.83 

1,127,006.08 

1930 

1,024,680.25 

66,691.86 

1,091,372.11 

1931 

999,7BC,25 

56,223.01 

1,055,973.26 

1932 

971,980.25 

47,626.65 

1,019,606.90 

1933 

926,825.75 

42,736.27 

969,562.02 

1934 

879,655.75 

37,401.57 

917,057,32 

1935 

838,870.25 

43,117.66 

861,987.91 

1936 

809,570.25 

23,263.65 

832,933.90 

1937 

781,748.25 

17,857.54 

799,605.79 

1938 

717,113.25 

12,660.69 

729,673.94 

1939 

667,668.25 

10,984.00 

678,652.25 

1940 

553,057.75 

5,892.01 

558,949.76 

1941 

462,073.89 

2.519.50 

464,593.39 

1942 

348,804.50 

348,804.50 

1943 

288,558.00 

288,558.00 

1944 

240,292.50 

240,292.50 

1945 

197,682.00 

197,682.00 

1946 

161,817.00 

. 

161,817.00 

1947 

123,899.50 

123,899.50  . 

1948 

95,599.50 

95,599.50 

1949 

65,812.00 

65,812.00 

1950 

25,182.80 

25,182.80 

1951 

2,350.00 

2,350.00 

$20,907,575.54 

$1,158,020.27 

^22,065,595.81 

Interest  paid 

prior  to  1922 

on  present 

Sinking  Fund 

Bonds- 

9,7R2,06O.OO 
50,669,635.54 

When  the  present  outstanding  bonds    ($31,244,200)  payable  from  the 
General  Sinking  Fund  are  all  retired,    the  City  will  have  paid  a  total  in 
interest   of  $30,689,635  which  shows  that    for  each  dollar  borrowed  an  average 
of  98  cents  will  be  paid  in  interest  before  the  debt   is  cancelled. 

The  foirowing  question  very  naturally  raises  itself:  Is  there 
any  economical  system  of  financing  public  improvements  that  will  save  the 
98  cents.     Tliat  question  will  be  discussed  in  a  later  section  of  this  report. 


15. 


II ,  SINKING  FUND  REQUIREMENTS. 

1.  A  SINKING  FUND  RTXORD. 

To  make  a  coinplote  examination  of  the  Sinking  Fund  with 
the  object  in  view  of  accurately  cc»nputing  its  requirements,  the 
Bxireau  printed  a  card  showing  all  of  the  information  with  regard 
to  each  separate  bond  issue. 
A  reproduction  of  one  of  the  cards  follows: 


16, 


^Annual  Installamtits  base3~on  Sinking  Funia' 
j  Earnings  at  4^ 

(Factor    .01783010  r*200,000  For  Period  of  30  Years) 

Annual  Interest  Charge 


5566.02 


Year 


Bond 
Year 


1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 
1905 
1905 
1907 
1908 
1909 
1910 
1911 
1912 
1913 
1914 
1915 
1916 
1917 
1918 
J1919 
1920 
'•■'921 
922 
923 
1924 
1925 


1 
2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

15 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 


Required  S, 
at  end  of 
Bond  Year 


F.i 


3 

7 

11 

15 

19 

25 

28 

52 

37 

42 

48 

53 

59 

65 

71 

77 

84 

91 

98 

106 

114 

122 

130 

139 

148 

158 

167 

178 

188 

200 


565.02 
274,68 
131,72 
142.92 
314.64 
652.84 
165.92 
357.52 
737.80 
813.36 
091.80 
581.48 
290.72 
228.40 
403.44 
825.68 
504.64 
450.80 
674.80 
187.80 
001.32 
127.32 
578.44 
367.56 
508/28 
014.60 
901.20 
195.32 
877.20 
000.00 


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On  the  card  reproducod  herewith  a  Bond  issue  of  jS!200,000  was 
made  on  Janiary  1st,    1895  for  the  purpose  of  erecting  e.  water  works 
reservoir,  -  these  bonds  to  run  for  a  period  of  30  years.       The  annual 
interest  charge  at  ^%  was  v8,000  and  the  annual  deposit  in  the  .jinking 
Fund  |3566,02.«       In  the  proper  column  on  this  card  there  are   listed  the 
years  which  this   issue  covers,   1896  to  1925  inclusive,  and  the  amounts 
which  should  be   in  the  Sinking  Fund  on  any  one  of  those  years  if  the 
original  plan  provided  for  in  the   law  authorizing  this  issue  had  been 
complied  with*       It  will  be  seen  that  in  1921  there  should  be  in  the 
Sinking  Fund  applicable  to  this   issue  of  bends,  the   sum  of  ::'-158,014.60. 

Each  issue  of  bonds  was  computed  separately  and  the  figures  for 
each  year  were  recorded  on  the  proper  card.       It  is  therefore  possible  to 
ascertain  the  amount  which  should  be  in  the  Sinking  Fund  at  a^^y  given  year 
by  adding  the  amounts  on  tho  various  cards  shown  opposite  the  year  desired. 

This  has  been  done   for  the  year   1921  and  a  comparison  of  the 
resulting  total  with  the  amount  now  in  the  Sinking  Fund  shows  the 
following: 
•  • 
2.  THE  SINKING  FUM)  BALANCE  &  SHORTAGE, 

The  balance  in  the  Sinking  Fund  on  December  31st,   1921  was 
t2, 606, 318.20.  Adding  the  amounts  shown  opposite  the  year   1921  on  each 

of  the  bond  cards  described  above,   it  is  found  that  the  Sinking  Fund  should 


10. 


now  have  a  balance   of  approximately  i^ 7, 600, 000*   on  December  31,   1921. 
This   calculation  indicates  a  shortage  of  .^5,000,000  between   the  amount 
now  on  hand  in  this   fund  and  what  should  be  on  hand  if  the  nrovisions  of 
each  legislative   act  had  been    complied  with,  and  this  shortage  will  b6 
further   increased  Oui'ing  1922 • 

There  should  have  been  deposited  for  1922  the  sum  of 
11,392,893.25,  and  the    levy  has   only  been  for  3  mills   or  about  :?788,000 

together  with  expected  earnings   of  about  ^100,000  -  from  which  is  to  be 

therefore 
deducted  the  maturities  for  1922  of  ;|557,000,  ,it  will  be  seen  that  the 

difference  at   the  end   of  1922    (before  which  timo  it  will  not  be  possible 

to  make  further   levy)  will  be  approximately  .-^6,000,000,   as  follows: 

Present  Shortajje  ;$ 5, 000, 000 

Required  deposit  for   1922  1,392,895       $6,392,893 

3  Mill  levy  will  produce(est . )  788,000 

Earnings  "       *    "  (est.)   '         104.000 

— ETc'^acr 

Deduct  for  Maturities  557,000 

Sinking  Fund  will  gain  335,000 

Estimated  Shortage  in  S.  F.  Dec.   31,    1922  -  -$6,057,893 

The  amounts   of  the  required  annual  deposits   in  the  Sinking 

Fund  for  each  year  are  shown  in  the  table  following.     These  totals  are 

arrived  at  by  adding  the  annual   denosit  for  each  issue  of  bonds  during  the 

balance  of  its   life. 

The  table  also  shows  the  estimated  assessed  valuation  based  on  an 

annual  increase  of  3^  and  the  necessary  millage  to  provide  the  required 

annual  deoosit* 

*       This  total  is  arrived  at  by  figuring  all  bonds  as  sinking  fund  bonds  with 
the  exception  of  two  serial  issues    of  sewer  bonds  and  one  serial   issue   of 
school  bonds    (1921)  which  matures    in  equal  annual  payments   of  $41,000. 
There  are  several   issues  of  bonds  which  might  be  classed  as  deferred 
serial  bonds,   notably  the   issue   of  1920(Schools)f or  s* 2, 000, 000  which 
matures   in  irregular  amounts   in  non-consecutive  years.      If  such  issues 
as  this  are  classed  as  Serial  Bonds  and  only  the  amount   of  the  maturity 
for  any  given  year  be   included   in  the  sinking  fund  requirement  for  that 
year   it  will  lessen  by  a  considerable  amount  the  present  required 
Sinking  Fund  Bdlance. 

The  Bureau  has  preferred  to  base   its  calculations  assuming  that  all 
bonds,   other  than  the  exceptions  noted,   be  classed  as   sinking  fiand  bonds, 
but  it  has  not   overlooked  the  possibilities   of  the  other  method  of 
calculation.  19, 


ESTB^ATED  ANNUAL  ASSESSED  VALUATIOM  AWD  MILLAGE. 

REQUIRED 

ESTIMATED 

ESTDIATED 

ANNU/i.L 

ASSESSED 

REQUIRED 

YEAR 

DEPOSITS 
11,282,211.16 

VALUATION 
1272,000,000 

MILLAGE 

1923 

4.70 

1924 

1,140,544,34 

281,500,000 

4. 

1925 

1,043,082.82 

291,500,000 

3.30 

1926 

930,578.85 

301,500,000 

3.10 

1927 

851,945566 

312,100,000 

2.70 

1928 

730,064.41 

323,000,000 

2.30 

1929 

668, 110. 03 

334,300,000 

2,00 

1930 

620,055.04 

346,000,000 

1.80 

1931 

588;i71.90 

358,100,000 

1,65 

1932 

545,451.87 

370,700,000 

1.50 

1933 

508,119.65 

383,700,000 

1.30 

1934 

480,278.39 

397,100,000 

1.25 

1935 

448,964.93 

410,900,000 

1.10 

1936 

418,588.82 

425,300,000 

1.00    . 

1937 

393,719.95 

440,100,000 

.90 

1938 

366,943.50 

455,500,000 

.80 

1939 

343,805.53 

471,500,000 

.70 

1940 

289,427.35 

488,000,000 

.60 

1941 

264,288,82 

505,100,000 

,55 

1942 

204,555.08 

522,800,000 

.45 

1943 

167,812.84 

541,000,''X)0 

.35 

1944 

153,599,47 

560,000,000 

•  30 

1945 

127,241.91 

579,600,000 

.25 

1946 

113,885.57 

599,900,000 

.20 

1947 

98,967.54 

620,900,000 

.15 

1948 

85,103.69 

642,600,000 

.12 

1949 

76,338.80 

665,100,000 

.11 

1950 

62,182.48 

688,400,000 

.10 

1951 

53,000,00 

712,500,000 

.08 

*  NOTE:       Based  upon  the  annual  increase   in  Assessed  Valuation  for 
the  past  30  yoars,  and  in  agreement  with  the  estimates   of 
various  financial  officers,  3-|%  has  been  set  as  being  a 
conservative  annual  increase  rate  during  the  next  ten  years 
and  it  is  to  bo  expected  that  the  rate  of  increase  will  be 
somewhat  in  excess  -  although  attention   is  called  to  the 
fact  that  the  1922  valuation  is  $1,200,000  less  than  the 
estimated  amount  used  in  the  tables  on  subseo^uent  pages 
of  this  study. 


20. 


54  EFFECT  OF    SINKING  FUND  ON  BOND  PRICES 

Ylhether  or  not  the  difference  in  the  amount  which  should  be  in 
the  Sinking  "Fund  has  a  direct  bearing  upon  the  price  offered  to  the  City 
of  Minneapolis  for  its  bonds  by  the  various  firms  purchasing  them, is  a  matter 
well  worth  consideration* 

Interviews  writh  officers  of  bonding  houses  indicate  that  the 
market  for  Minneapolis  bonds   lies  chiefly  in  the  states  of  I^assachusetts 
and  New  York.       The  legality  of  the  purchase  by  savings  banks  in  the  above 
states  of  the  City's  bonds   is  governed  by  the  nearness  to  which  th^  city 
is  approaching  the  bonding  limit  fixed  by  statute.       At  the  present  time 
the  bonds  of  this  oity  are  not  a  legal  purchase  for  savings  banks  in  th« 
state  of  Massachusetts  due,  no  doubt,  to  the  small  margin  left  before 
Minneapolis  reaches  the  limit  of  its  bonded  debt. 

The  balance  in  the  Sinking  Fund  has  a  direct  bearing  on  the  net 
debt,  inasmuch  as  the  balance   in  that  fund  is  deducted  from  the   gross  bonded 
indebtedness. 

A  good  example  of  the  value  of  an  adequate  sinking  fund  is  shown 
by  the  report   of  the  City  of  Toronto  (1920)  which  shows  a  gross  bonded  debt 
of  ^$103,819,125  ag&inst  which  there  is   in  the  sinking  fund  C28,366,344  -  or 
approximately  Zb%  of  the  gross   debt  -  while    in  Minneapolis  the  sinking 
fund  is  only  &fo  of  the  debt  after  deducting  all  bonds  to  be  paid  by 
special  levy. 


21. 


*•       LII-gT  OF  BONDED  DSBT 

Prior .to  Novomber,  1920,  Minneapolis  had.  the  distinction  of  being 
the  only  city,  of  its  class  not  under  Home  Rule  and  many  laws  were  passed 
©specially  applicable  to  Minneapolis  because  of  that  distinction,  altho  so 
framed  in  wording  and  character  as  to  ]pe  clasced  as  "Gonoral  Laws,'' 

However,  upon  the  adoption  of  a  charter,  the  City  came  within  the 
jurisdiction  of  thoso  laws  applicable  to  cities  of  the  first  class  under 
Home  Rule,  one  of  which  (sec.  1346  G.  D.  1913)  stipulates  that  the  aggregate 
bonded  indebtedness  may  not  exceed  five  percent  of  the  assessed  valuation 
unless  the  chai-ter  provide  for  the  submission  of  proposed  issued  in  excoss 
of  5%  to  the  majority  approval  of  the  voters.   In  no  caso  mcy  the  limit  of 
bonded  debt  exceed  lOj^  of  th^  assessed  valuation. 

Inasmuch  a^r.  Minnoapolis  had  already  passed  thu  b^o   limit  provided 
by  law  and  liad  arranged  for  and  advortised  a  sale  of  bonds  in  Noi^ombcr,  1920  - 
with  insufficient  tiiac  to  provido  for  a  spocial  cloction  for  submission  to 
the  voters  -  and  inasmuch  as  the  10^  limit  had  already  been  excooded  if 
moneys  and  credits  were  not  included  in  figui'ing  "assessed  valus.tion",  it 
became  imperative  that  legislative  action  be  taken  at  once  to  clear  the 
situation* 

A  curative  act  was  thereupon  prepared  and  submitted  to  the 
Legislature  and  adopted  by  that  body  amending  the  Home  Rule  Act  (Sec.  1346) 
omitting  the  clause  with  reference  to  the  5%   limit  and  the  necessity  for 
submission  of  bond  issues  to  the  approval  of  the  voters  and  also  definitely 
including  moneys  and  credits  into  the  total  assessed  valuation. 

Had  this  law  not  been  enacted  by  the  Legislature,  Minneapolis  would 
have  found  herself  in  the  position  of  having  exceeded  the  bonding  limit 
fixed  by  statute,  with  a  Ic.rge  issue  of  bonds  for  needed  improvements 
(many  of  which  were  in  course  of  construction)  advertised  for  sale  which 
could  not  be  disposed  of  because  legal  advisors  of  prospective  purchasers 

22. 


questioned  the  legality  of  the  sal©  under  existing  conditions. 

For  the  year  1922  this  total  assessed  valuation  will  be 
^!!360,471,116  whioh  would  permit  of  a  total  bended  debt  of  <J36,047,1H. 
(See  pages   12  and  13  for  net  debt). 

A  table  has  been  prepared  shovring  the  estimated  increase  in 
valuation  for  bending  purposes  -  based  on  an  annual  increase  of  3-^  percent,- 
and  in  proper  columns  is  shovm  the  bonding  limit  and  the   largest  annual 
issue  T)ossible  in  order  to  keep  within  that  limit* 

This  ten  year  table  is  made  on  the  aasurantion  that  all  future 
bond  issues  v/ill  be   "Serial  Bonds"  payable  in  equal  annual  installments 
for  30  years,  where  the  life  of  the  improvement  -.warrants  such  issue. 
This  agrees  with  the  plan  informally  adopted, by  the  Board  of  Estimate 
and  Taxation,  referred  to  on  page  25» 


23. 


TABLE  NO.    6  3H0vfIKG  BO^TDTMU  Ll?,tIT  AhB 
A^IOUUT   CFBairOS  M{TCHjfAT  BT,  "IS'S  UED  Ar-T^Tl/^riLY "  70R  A  TEN 
mR  ~i?5RI0D  b7:s":T)'"0^4   '.W    II JCr1:AG"E  Tn  .^^'s'ES" S ED  VALO/'TIOri 
A"f  r-5^  R/JfE .    ' ■"    


1 

2 

Assea'sed 

3 

Year 

Valuat  ion 

Bonding 

for 

Limit 

Bonding  Purposes  Fixed  By  Law 

(la/o  of  Col. 2) 

1921 

ret 

Bonded  Debt  Decer 

1922 

360,471,116 

36,047,11^ 

1923 

373,087,605 

37,308,760 

1924: 

386,145,671 

38,614,567 

1925 

399,360,869 

39,966,086 

1926 

413,649,000 

41,364,900 

1927 

428,127,715 

42,612.771 

1928 

443,113,185 

44,511,318  V 

1929 

458,622,14? 

45,862,214 

1930 

474,673,922 

47,467,392 

192 1 

49;, 287, 610 

49,128,761 

4  5  6 

Amcnant    (est .  )D8duct  Net 

That  l!ay  For  Bondt-d  Debt 

Be   Issued         Bonds  *At 

Eaoh  Year       Redeemed  End  of  Year 


(Compare   '^"^^J^  C<3l3 


4,000,000  557,000  31,121,37'3 

4,000,000  368,833  34,252,546- 

4,000,000  717,666  37,534,876 

3,000,000  1,464,000  39,070,876 

3,000,000  1,252,000  40,818,876 

4,000,000  2,783,000  42,036,876 

3,300,000  1,520,533  43,816,343 

3,000,000  1,615,333  45,201,010 

3,000,000  1,413,333  46,787,677 

5,500,000  1,707,533  48,580,344 


5.  THE  THREE-I-^ILI-  LEVY  AND   ITS   LIMITATIOHS 

Whxler  tna  various   legislative  acts  provide  that  a  "sufficient 

amount  be   levied  annually  to  provide  for  the  accumulation  of  a  sinking 

fund  for  the  redemption  of  auch  issue  at  its  maturity"   -  -  -   it   is  also 

true  that  the  Minneapolis  Charter  provides  that  the  Sinking  Fund  shall  be 

maintained  by  an  annual  levy  of  1  mill  for  each  dollar   of   the  assessed 

l?.r£.3l3' 
valuation.       This   levy  was   increased  to  3  mills.^as  a  result   of  the 

Sinking  Fund  study  made  by  the  Bureau  of  Municipal  Research  in  1916. 

The  Tax- levying  body  has  been  maintaining  the  Sinking  Fund  by 

means  of  the   one  mill  and  the  three  mill   levies   rather  than  following 

strictly  the  provision  of  eaoh  legislative  act  already  referred  to  on 

pages  4  and  5  of  this  report.  24. 


The  prasent  contemplated  plan  provides  that  a  3  mill  tax  on 
the  Assessed  Valuation  of  Real  and  Personal  Property  be   levied  and  the 
receipts  deposited  in  the  Sinking  Fund  to  provide  funds  for  the 
redemption  of  the  present   outstanding  bonds.        There  is  a  tacit  under- 
standing by  members   of  the  Board  of  Estimate  thi-.t  all  future  bond  issues 
shall  be  matured  serially  -i.e.  equal  installments   of  the  total  issue 
shall  be  retired  annually  beginning  one  year  from  date  of  issue  -  the 
whole  amount  to  be   paid  within  30  years. 

In  the  years   1922-3-4  this  3  mill   levy,  together  with  estimated 
earnings  on  the  present  Sinking  Fund   and  interest    on  dofcrrcd  payments 
in  the  Revolving  Fund   (estimated  by  the  Comptrollor  at  about    "'100,000 
annually)  will  provide  an  amount  in  excess   of  the  amounts  of  bonds  maturing 
in  those  years. 

In  1925  and  again  in  1927    ( "^a      graph  on  page  8)  the  amounts 
maturing  far  exceed  the  3  mill  levy  and  the  earnings  a^iailable  for  either 
of  those  years, 

Hcwrever,   if  a  three-mill  tax  is   levied  annually  and  placed  in 
the  sinking  fund  -  and  AN  ADDITIOIAL  LEVY  _IS  !i\DE  TO  RSDEmi  ALL  FUTURE 
ISSUES,  this   3-mill  plan  will  provide  the  necessary  funds  to  rodcom  all 
of  the   present   outstanding  bonds  as  shown  on  the  follaving  table: 


25. 


TABLE   NO.   7  SH(WING  CONDITION  OF  SINKING  FUND 
BASED  ON  3-MILL  LEVY  TO  C/VRE   FOR  PRESiiJiT   OUT- 
STANDING BOiJDS   ONLY,       ASSESSED  VALUATION 
FIGURICD  ON  3^  ANNUAL  INCREASE. 


1 

2 

3 

4 

""   5 

6 

Estime.tod 

3-.Mill 

Deduct 

Balance 

Necessary 

Year 

Valuation 

Levy  and 

Maturities 

in 

Annual 

Real  &  Pers. 

Estimated 

of  present 

Sinking 

Levy 

Property 

Earnings 

Indebtedness 

Fund 

(in  mills) 

1921 

Bala; 

nee  in  Sinking 

Fund  Deo.  31 

-  2,606,300 

1922 

?:62,60O,0O0 

888,400 

557^,000 

2,937.700 

* 

1923 

272,000,000 

916,000 

735,500 

3,118,200 

2.70 

1924 

281,500,000 

944,500 

451,000 

3,611,700 

1,65 

1925 

291,300,000 

974,100 

1,064.000 

3,521,800 

3.70 

1926 

301,500,000 

1,005,000 

762,000. 

3,774,800 

2.60 

1927 

312,100,000 

1,036,300 

2,182,000 

2,629,100 

7,00 

1928 

323,000,000 

1,069,100 

787,200 

2,911,000 

2.50 

1929 

334,300,000 

1,103,000 

772,000 

3,242,000 

2,30 

1930 

346,000,000 

1,138,100 

470,000 

3,910,100 

1,40 

1931 

358,100,000 

1,174,500 

664,000 

4,420,600 

1.90 

1932 

370,700,000 

1,212,100 

918,000 

4,714,700 

2.50 

1933 

383,700,000 

1,251,000 

1,075, COO 

4  ,.890, 700 

3.00 

1934 

397,100,000 

1,291,300 

1,090,000 

5,092,000 

3.00 

1935 

410,900,000 

1,333,000 

777,000 

5,648,000 

1.90 

1936 

.Ra6,0OO,OOO 

1,376,000 

577,000 

6,447,000 

1.30 

1937 

440,100,000 

1,420,500 

1,576,000 

6,291,500 

3.50 

1938 

455,500,000 

1,467,000 

1,210,000 

6,548,500 

2,70 

1939 

471,500,000 

1,514,500 

2,635,000 

5,427,500 

5.60 

1940 

483,000,000 

1,564,000 

1,142,000 

5,849,600 

2.40 

1941 

505,100,000 

1,615,300 

3,151,700 

4,313,300 

6.25 

1942 

523,800,000 

1,668,300 

2,232,000 

3,749,600 

4.30 

1943 

541,000,000 

1,723,200 

673,300 

4,799,500 

1.25 

1944 

560,000,000 

1,780,000 

1,503,000 

5,076,500 

2.90 

1945 

579,600,000 

1,839,000 

697,500 

6,218,000 

1.20 

1946 

599,900,000 

1,900,000 

807,000 

1.35 

1947 

620,900,000 

1,963,000 

775,000 

1.20 

1948 

642,600,000 

2,028,000 

409,000 

.76 

1949 

665,100,000 

2,095,400 

935,000 

1,50 

1950 

688,400,000 

2,165,200 

573,000 

.85 

1951 

712,500,000 

2,237,500 

53,000 
31,244,200 

• 

From  the  above  table   (col, 6)  it  will  be  seen  that  a  3  mill 
levy,  plus  earnings  on  amounts   in  the  Sinking  Fund,  will 
provide  sufficient  funds  to  safely  carry  over  the  peak 
years   of  1941-1942,  following  which   the  maturities  fall  below 
the  estimated  earnings  for  each  year*         In  column  6  it  is 
shown  that  the  necessary  annual  levy  is   less  than    3  mills 
in  all  but  eight  years,  during  the  30  year  period. 


26. 


If,  hcwever,   it   is  planned  to  issue  bonds  during  the  next 
several  years  up  to  the  limit  shown  on  page  24,    (col.   4)  without  in- 
creasing the  3-mill   levy  for  the  Sinking  Fund,  this  Bund  will  be  exhausted 
during  the  year   1928  as  will  be   seen  from  the  following  table: 


TABLE  IJ0.8  SHOWING  CONDITTON  OF  SINKING  FOND 
BASED  ON  3  MILL  LEVY  TO  CARE  FOR    'PRESENT   IN- 
DEBTEDNESS AWD  FUTURE  ISSUES   OF  SERIAL  BONDS 
(SEE  TABLE  NO.  G  PAaa.24).     AS..i']S:.JVD  VV.   ••••T:)  < 
FIGURED  AT  3^i  ANNUaL  INCREASE. 


1 

2 

.') 

4 

5 

6 

Assessed 

Add   5-mill 

Tot,al 

Deduct 

Balance 

Year 

Valuation 

Levy  a..v?. 

Sinking 

Total 

In 

?)^o  Annual 

EstiiTvn.tocT 

Fund 

Jiaturities 

Sinking 

Incroaso 

Sarni  nj;s 

Available 

•Fund 

19ai 

Balance  in  Sinki 

rkg  Fund  December  31st  -  - 

2,606,300 

i922 

262,800,000 

888,400 

3,494,700 

557,000 

2,937,700 

1923 

272,000,000 

916,000 

3,853,700 

868,800 

2,984,900 

1924 

281,500,000 

944,000 

3,928,900 

718,000 

3,210,900 

1925 

291,300,000 

974,000 

4,184,900 

1,464,000 

2,720,900 

1926 

301,500,000 

1,005,000 

3,725,900 

1,252,000 

2,473,900 

1927 

312,000,000 

936,300 

3,436,900 

2,783,000 

653,900 

1928 

323,000,000 

977,000 

1,630,900 

1,520,000 

110,900 

1929 

334,300,000 

1,003,000 

1,113,900 

1,615,000 

501,100* 

1930 

346,000,000 

1,038,000 

1,414,000 

376,000* 

1931 

358,000,000 

1,074,000 

1,708,000 

634,000* 

*       Deficit. 

Note;  The  Balance   in  the  Sinking  Fund   (Col. 6)   plus  the  3  mill  levy 

and  B;arnings    (Col.   3)  makes  up  To-Lal  Sinking  Fund    (Col.   4) 
fran  which  is  deducted  Total  '^'Iaturities    (Col.   5)  to  produce 
final  Balance  in  Sinking  Fimd    (Col.  e*). 


27, 


III.  MODERN  TENDENCIES   IN  FINANCE. 


That  many  cities  and  states  have  coine  to  a  clearer 
realization  of  the  need  for  a  closer  supervision  over  their  Bonded 
Debt  is  evidenced  by  the  passage  of  Laws  and  the  adoption  cf  Financial 
Codes   in  various    st-atos  vrhinh  define   in  detail  ViOw  bonds  may  be   issued, 
their  clacsif ication,  term,  maximum  indebtedness,  and  method  of  payment. 

Three   of  these  newer  theories  will  be  mentioned. 

1.  The  Financial  Code  of  the  State  of  New  Jersey  -  adopted 

in  1916 

2.  The  ''Pay-as-you-go"  plan  of  financing  permanent  improve* 

ments.  adopted  by  the  City  of  New  York  in  1914. 

3*  Serial  Bonds  and  their  relative  cost. 


28  • 


^»  TFIE  ^ITO  Jfflyf  FINMCIAL  CODE. 

Thi)  state  of  New  Jersey,    in  tlio  Financial  Code  en^ct0d  by  its 
Legis?_ature   in  1916,  has  lod  the  way  for  other  states   in  the  matter  of 
directing  how  homi.G  iimy  be  issued  -  classifying  the  character  of  each 
public   iiTiprovenTPnt,  and  the  term  of  the  bonds  to  be   istjved  for  the  payment 
thereof. 

Tills  law  also  provides: 

That  no  bonds  shall  be  issued  to  pay  for   Current 
Expenses   or  to  fvnd  any  indebtedness   incurred  therefor. 

Tliat  all  bonds  shall  nature  in  ann  lal  installments,- 
no  installinent  to  be  for  more  than  50  percentum  in 
•  excess  of  tlie  amount  of  the  smallest  prior  installment* 

(This  periiits  an  increasing  payment  on  Prinoipal  as  the 
buTden  of  interest  becomes   lessened*) 

A  law  similar  to  that  of  Wevr  Jersej*-  is  beiiig  prepared  for  the 

Ohio  State  Legislatvire,  which  has  an  additional  provision  that  an  iiiprove- 

ment  whose  life  is  not  >iiore  tlTan  five  years  shall  be  i^iJi©^  "  Current 

Improvement"  for  v/hich  no  bonds  iiiay  be  issued,  but  which  shall  be  paid 

for  out  of  ouxront  tax  lovj', 

Ner^v  York  State  passed  a  law  November  2,  1920  by  a  2  to  1  voto  - 

requiring  that  all  dobts   of  the  state  except  te.fporary  loans,  etc.-— — - 

"shall  be  paid   in  equal   installiients  the  first  of 
which  shall  bo  payable  not  more  than  ono  year  and 
the  last  of  v.'hich  shall  be  payable  not  more  tlian 
50  years  after  such  debt  or  portion  tboroof  shall 
\vxvQ  been  contracted." 

and  further  provides,  that 

"llo  such  debt  hereafter  authorized  shall  be  con- 
tracted for  a  period  longer   than  that  of  the 
probable  life  of  the  %vork  or  object  f|r  '//hich 
the  debt  is  to  be  contracted." 

In  tho  folia,  ing  brief  outline  of  tho  olassJ^'icatioA  included 

in  the  Kev7  Jersey  Law,  and  also  in  ttie  proposed  Ohio  l^u  it  will  be  noted 

that  different  tj^pes  of  building  and  other  construction  ^ore  classified  under 

29* 


various  terms  of  bor^d  Issues: 

50  -  Year  Bonds  may  bo  issued  for; 

Acquisition  of  Land   for  Parks- 
Elimination  of  Grade  Crossings- 

40  -  Year  Bonds  may  be   issued  for; 

Tho  construction  of  a  Sewer  System^ 
The  construction  of  a  Water  Supply  System- 
Buildings  of  Fireproof  Construction- 
(Additions  to  such  buildings  to  be  30-Year  Bonds) 

30  -  Year  Bonds  may  be  issued  for: 

Acquisition  or  construction  of  a  Gas  System- 
Acquiring  lands  for  Playgrounds- 
Buildings  of  non-fireproof  construction- 
(Additions  to  such  buildings    .o  be  20- Year  Bonds* 
Bridges    (including  retaining  walls    and  approaches 

of  Stone,  Concrete  or  Iron  construction..) 
Acquisition  of   land  for  Roads,  Streets,  Highways, 

Elimination  of  curves,   or  Grading  Culverts, 

Bridges   or  Retaining  Walls. 
Installation  of  Fire  or  Police  Alarm,  Telegraph 

and  Telephone  System* 

20-»-  Year  Bonds  may  bo  issued  fort 

Acquisition  or  construction  of  Electric  Lig)Kt  System, 
and  equipment,   or  machinery,   or  apnaratus. 

Buildings  -  Frame  or  brick   veneer- 

(Additions  to  such  buildings  same  as   15  year  Bonds) 

Paving!       -Blocks   or  Sheet  Asphalt   laid  on  concrete 
foundation. 

Concrete  if  not   less  than  6  inches   in  thickness. 

15  -  Year  Bonds  may  be  issued  fort 

Paving:         Bituminous  concrete, 

10  -  Year  Bonds  may  be   issued  for: 

Fire  engines,  trucks  and  hose  aiiri  other  vehicles  in  Pire 
Department*     Ambulances,   Patrols  or   other  municipal 
vehicles  • 
Paving  -  Water-bound  Macadam. 

Curbing  or  sidewalks  of  brick,    stone  or  concrete* 
All  equipment  -  apparatus  and  furnishings    (not 
previously  specified) 
•     Incineration  Plant    and  equipment  or  machinery. 

5     -  Year  Bonds  may  be  used  for: 

Paving!     Sand  or  Gravel 

Service  connections  -  Sewer,  Water,  Gas  from  street  to 
property  line* 

S0« 


2 ,  THE  "PAY-AS-. YOU- QQ"   PUN 

There  is  a  grcwing  tendency  in  rnany  citios  throughout  the 
country  to  place  !!unicipal  fxiiances   on  a  Cash  Basis  or  on  what  has  been 
tormod  a  "PAY-AS-YOU-GO''  nian. 

Briefly,  t-iis  nlan  as  adq)ted  in  Nmr  York  contemplates  the  financing 
of  all  non-revenue  producing  improvements   out  of  current  taxation,  and 
provides  the  method  Ly  which  a  city  adopting  such  a   plan  may  arrive  at  the 
lOC^  current  taxation  point,  by  gradinl  ^tepc  coverinp;  a  period  of  four 
yoars.       This   is  moi-e  clearly  illustrated  by  the  following  cxcorpt  from 
that  plan  adootod  in  the  year   1914: 

Sec,   1.       The  post  of  all  iranrovements   of  tho  rovsnue  producing 
class,   such  as  rapid  transit,   docks,    railvray  and  vater  terminals  and  'vater 
supply,   shall  bs  defrayed  by  the  issue  of  fifty  year  cornorate  stock     as 
heretofore. 

Sec,   2.       The  cost  of  all  permanent  impro\-e'nents  other  than  those  of 
the  revenue  producing  class,  shall  be  financed   as  follows: 

(a)     Those  author i2ed  during  the  next  succeeding  year    (1915) 
shall  be  paid  for,  three-quarters  by  the  issue  of  fifteen  year 
corporate  stock;   stock  so  issued  shall  mature  either  in  not  more 
than  15  years,   amortized  as  provided  by  lav;,  or  in  equal  annual 
installments,   during  a  period  of  not  more  than  fifteen  years.       The 
remaining  one-quarter  of  the  cost  of  such  improvements  shall  be  paid 
throug)^  the  medium  of  a  one  year  bond,  payable  from  the  next  annual 
tax  Budget. 


31. 


(b)  Those  authorized  in  the  year   1916  shall  be  paid  for, 
one-half  by  the   issue  of  corporate  stook,  maturing  as  aforesaid. 
The  remaining  one-half  of  the  cost  of  such  improvements  shall  be 
paid  through  the  medium  of  a  one-year  bond  payable  from  the  next 
annual  tax  budget ^ 

(c)  Those  authorized  in  the  year  1917  shall  be  paid  for, 
one-quarter  by  the   issue  of  corporate  Stock  as  aforesaid.     The 
remaining  three-quarters   of  the  cost  of  such  improvements  shall 
be  paid  through  the  medium  of  a  one-year  bond  pajrable  from  the 
next  annual  tax  budget. 

(d)  Those  authorized  during  the  year  1918  anu  in  subsequent 
years  shall  be  financed  through  the  inclusi;Jn  of  the  entire  cost 
thereof  in  the  c.nnual  budget  of  the  city  except  the  revenue  pro- 
ducing imp^'ovements  hereinbefore  mentioned. 

Such  a  pl^n,   if  adopted  :n  Minneapolis,  would  subject  all 
proposed  future   issues  of  bonds  to  a  very  careful  scrutiny  as  to  the 
urgency  of  the  need  of  the  contemplated  improvement •> 


3.  SERIAL  BONDS  AND  THEIR  REUTIVE  COST 

Throughout  all  the  plans   being  formulated  in  other  cities  and 
states   looking  toward  a  solution  of  their  financial  problems  there  is 
found  in  each  instance  the  suggestion  or  .direction  that  ell  bonds  be 
issued  as   Serial  Bonds  payable  in  annual   installments  during  the  life  of 
the  issue. 

The  reason  for  this   stipulation  is  that  city  officials  have  too 
often  been   lax  in  their  duty  to  levy  sufficient  taxes  to   create  an  adequate 
sinking  fund  for  the  amortization  of  bonds  as  they  became  due,  frequently 

32. 


necessitating  tho  refunding  of  loans ♦ 

There  are  three  distinct  methods  which  may  be  followed  in  the 

payment  for  public   ImprcvementG,  viz: 

a*       The  Pay^as-you-tro  method,  which  providoc  that  the  debt  be 
paid  from  direct  taxation  not   latur  than  one  year  after   it 
is   incurred". 

RESULT:       High  tax  levy  for  debt  redemption  and  a 

minimum  tax   levy  for  interest  carrying  charge. 

b»       The  Sinking  Fund  mothod,  which  provides  that  the  burden  be 
spreaT'ovLr  a  period  of  years,  annual  deposits  being   laid 
aside  to  accumulate  at  interest  to  Provide  an  adequate  sum 
at  maturity  d^-te.     The  interest   on  the  whole  debt  shall  be 
paid  ann^oally. 

RESHLT:        Lc/r  tax  levy  for  debt  redemption  and 

maximum  tax  levy  for  interest  carrying 
charge » 

c»       The  Sorial  method,  which  provides  for  the  redemption  of  a 

por'tTorr'(S'"th"e~?ebt  annually  from  tax  levy,  which  automatically 
reducer  the  annual  interest   charge. 

RESULT:     Medium  tax  levy  for  debt  redemption  and 
gradually  reducing  levy  for  interest 
carrying  charge. 

The  Serial  method  of  debt  retirement  carries  with  it  the  surety 

that  the  debt  will  be  paid  as   it  matures,   inasmuch   as  the  annual  amount 

due  is  at  all  times  known  and  the  amount  to  bo   levied  is  not  left  to  the 

discretion  of  the  tax-levying  body,  which  is  the  case  under  tho  Sinking 

Fund  method.,   as  practiced  in  Minneapolis . 


33, 


r/.  PROPOSALS  FOR  THE  FUTTJRE. 


!•  CO^^C  LIB  IONS 

In  the  foregoing  pages,   the  Bureau  ha?   endeavored  to  analyze 
the  present  status   of  the  Sinking  Fund  and  the  causes  therefor #       The 
facts   gathered  lead  to  the  following  conciusions:- 

1»       That  the  plan  of  lavying  a  millage  tax  for  tho  Sinking  Fund 
(one  mill  annually  prior  to  1917  and  three  mills  annually  thereafter) 
is  not   in  accord  with  tho  usual  provisions    of  tho  Bond   \cts   of  tho 
legislature,  and  the  legality  of  such  plan  is   open  to  quostion.        (see 
reference  to  Supremo  C^ourt  decisions   on  page  4.) 

2.  That  there  is  an  inadequate  amount   in  the  Sinking  Fund  duo  to 
the  fol loving  causes: 

a.  Failure  to  make  proper  annual  sinking  fund  levies, 
based   oii  amortization  tables,    sufficient  to  prc^rido 
funds  to  pay  for  each  issue   of  bonds  at  maturity* 

b.  The  issuing  of  short  term   (f ive-six-sevon-ton  and 
tv/elve  year)  bonds   for   impra'.'emcnts  whosu   life  v^ar- 
ranted  the  issuance   of  25  and^ 30  year  bonds,   causing 
an  undue  depletion  in  past   years  and   "peak   loads"   in 
the  future. 

0.  The  issuing  of  bonds  for  a  deficit  in  current  expenses 
■vTithout  providing  a  special  levy  for  their  redemption, 
putting  a  direct  and  unwarranted  burden  on  the  Sinking 
Fund . 

3.  That   if  there  had  been  a  strict  compliance  with  the   law  as  pro- 
vided  in  each  bond  act,  there  would  noiT  be   in  tho  Sinking  Fund  a  total  of 
(approximate ly)0 7, 600, 000 (see  page  19),   an  amount  .'^^ 5., 000, 000  greater  than 
the  present  Sinking  Fund  which  would  have  applied  as  a  reduction  against 
the  net  debt  and  also  have  provided  ample  funds  to  protect  all  outstanding 
bonds. 


34, 


stated  briefly  it  appears  as  follows: 

Present  Net  Debt  (See  table  pages  12  &13)  !f!27,678,375 
Deduct  for  required  difference  in  Sinking 

Fund  5,000,000 

True  Net  Debt,  based  on  re-calculation  $22,678,375 

Protecting  the  re-calculated  Not  Debt  there  would  have  been 

a  Sinking  Fund  of  ;i7,600,000  or  25^  of  all  bonds  to  be   paid   from  that 

fund,      (131,244,200  -  December  51,    1921) 

The  importance  of  the  above  figures  becomes  apparent   in  the 

statement  that  a  net  debt   of  ;i?22,678,375  would  have  given  a  bonding  margin 

of  §13,600,000,  ample  for  the  needs  of  the  city  for  many  years  to  come, 

without  the  necessity  of  the  curative  legislation  of   1921  to  in6rease  the 

margin  by  including  Moneys  and  Credits   as   part   of  the  assessed  valuation. 

4«       That  there   is  a  ^rcat  need  for  a  broad  plan  which  would 

effectively  restrict  borrowing.  It   is  evident  that  the  present  laws 

.designed  to  restrict  borrowing  and  place  a  limit   on  debt  have  failed  in 

their  purpose.   For  example:- 

(a)  The  statutory  limit  of  ^%   governing  the  indebtedness 
of  cities  under 'Home  Rule  was  removed  in  1921  when 
Minneapolis,  by  virtue  of  adopting  a  Home  Rule  Charter 
found  itself  beyond  that  limit. 

(b)  Bond  Acts  providing  for  definite  sinking  fund  deposits 
have  been  ignored. 

(o)   Bonds  have  been  issued  to  defray  deficits  in  Current 
Expense,  using  a  wrong  method  of  payment  (q. v. page  9) 

Each  improvement  for  which  bonds  are  to  be  issued  should  be 

carefully  soritinized  and  its  value  and  desirability  determined.  If  it  is 

of  sufficient  urgency  to  warrant  the  issuing  of  bonds,  payment  should  be 

arranged  so  that  othor  needed  improvements  in  future  years  may  not  be 

jeopardized  by  a  fast  approaching  debt  limit  (compare  the  present 

status  with  the  condition  set  forth  in  paragraph  3  above.) 


35. 


2 .  POSSIBLE  COURSES  COMPRISING  FIVE  PLAM_S_  OF  ■reOCEDURE 

There  are  jjariy  courses  open  for  the  future  control  pfHhe 

issuance  of  bonds  and  njeans  toward  their  redemption.       A  number  of  theso 

plans  are  ©numerated  on  the  follov/ing  pages, 

1,         Serial  bonds  may  be  issued  to  the  amount  shown  under  column  4 

of  table  on  page  ^4  and  place  the  burden  of  their  redemption  on  the  Sinlcing 

Fundt 

RESULT! 

The  effect  of  this  will  be  to  fully  deplete  the. Sinlcing 
J^rnd  in  1928  and  necessitate  an  additional  tax  over  the 
3  mill  levy. 

(See  table  on  Page  27) 

^ •         Pay  all  futiye  bond   issue  maturities  out  of  the  Sinlcing  Fund 

and  refund  some  or  all  of  certain  short  term  issues^ of  1915  for  an  additional 

term  of  18  years  which  were  issued  for   iiiprovements  whose  life  warranted  the 

issue  of  longer  term  bonds,  but  which  no\7  fall  due  in  1927,  visi- 

Water  100,000 

School  Buildings  6754OOO 

Hospital   Buildings  ICC, 000 

Parks  218,000 
Permanent  In^rove- 

ment  75,000 

Bassetts  Creek  50,000 

1,218,000 

RESULT; 

This  will  lave  the  effect  of  delaying  the  depletion  of 
the  Sinlring  !'\!nd  balance  until  1931  or  possibly  unt41 
1932  depending  upon  the  amount  of  interest  earnings, 
during  the  period   1922-1931, 

3,  Issue  Serial  Bonds  to  the  amount  shown  on  column  4  of  the 

table  on  Page  24  and  j)rovide  additional  tax  levy  each  year  over_  the  pre^sont 

5  mill  levy  for  the  redeniption  of  such  bonds  a.s^  and_  vfhsn  iss^dj^ 

RE5ULT: 

The  effect  of  this  plan  v/ill  be  that  the  present  3-mill 
levj"-  will  provide  an  amount  greater  than  necessary  to 
redoea  the  present  outstanding  bonds  as  th^  matvire. 
(See  table  Page  26.) 

36. 


4.  The   "Fa^r-As-Y^-^'o"  Flan. 

Fake  a  single  budget  for  all  estiinr.ted  expenditures,  both 
ourrent   end  per^-nanent  irnpro^/ement.         Then  ' 

a.  Ijevy  the  Icrost  necessary  amount  each  yoar  to  provide  for   out- 
standing  Cehi  infeturities,    including  t.ll  Sinking  Fund,  Serial 
and  Soecial  Levy  Bon-'ls   and  Certificates.      (See  first  two  coluirins 
in  Schedule  Vlo.n  ""'.-  page  39), 

b.  (a)  Provide  for  the  payuient  of  all  permr.nont  imnrovements 
authorized  for  the  year  1923  by  issuing  short«torm  serial 
bonds  for  oighty    '^SO)  per  cert   o.-^  the  total  of  such  author- 
ized amount  -  bonds  to  mature   in  equal  annual  installments 
beginning  one  year   from  their  date  of  issue.       The  ri^maining 
tvrenty   (20)  percent  to  be  financed  by  a   one-year  bond  payable 
from  taxation. 

c.  Provide  for  sixty   (fiO)  percent    oi  all  nennanent  irnproveinents 
authorized  for  the  ye^r  1924  to  be  financed  by  short-term  serial 
bonds    (maturing  as  stated  in  paragraph  "a")  and  the  remaining 
forty   (40)  percent  by  a   one-year  bond  paj'able  from  taxation. 

d.  Provide  for  forty   (40)  percent  of  all  permanent  iuprovement 
authorized  for  the  year  1925  to  be  financed  by  short-term 
serial  bonds    (mr.turing  as  per  paragraph  "A")  and  the  remaining 
sixty   (60)  norcent  by  a   one-year  bond  payable  from  taxation. 

0.     Provide   for  ti^'^nty   (20)  porcent   of  ail  nerman^nt   improvement 

authorized  for  the  year   1926  to   do  finar.ced  b"-  short-term  serial 
bonds    (maturing  as   per  paragraph  "A")  and  the  remaining  Eighty 
(80)  pei  ^ent  by  a  one  year  bond  payable   from  ta:<B.tion* 

f .     All   of  the  permanent  improvement  authorized  for  the  year  1927 

and  for  subsequent  years  to  be  financed  b/  a  one  year  bond 

payable  from  taxation. 

37. 


5»  Levy  the  necessary  amourrt  each  year  to  provide  sufficient 

funds  to  pay  present    and  future  maturities.       For  the  next 
ten  years  such  a  plan  will  require  approximately  the  fol- 
lowing: 

TABLS  NO.    10  SYSmmO  REQUIRED   LEVY  TO  RETIRE 
PRESENT  AND  FUTURE  BOND  MATURITIES. 


"T 2 

Bst .Yearly 

Tear       Levy  to  retire 
present  deist. 
(Soe  table  7  p. 26) 


5^                       4  6 
Est.   Yearly  Yearly  levy  to                    Total  for 
Levy  for  Retire  future  deht             Retire- 
Special  Based  on  Schedule  .            ment 
Issues.                         P.    24                               Of  debt. 


1925 

2.70 

1924 

1.65 

1925 

3.70 

1926 

2.60 

1927 

7.00 

1928 

2.50 

1929 

2.30 

1930 

1.40 

1931 

1.90 

1332 

2.50 

RESULT: 

2.15 

2.15 
2.15- 
2.15 
2.15 
2.15 
2.15 
2.15. 
S.15 
2.15 


.10 

1.00 

1:35 

1.60 
1.90 
2.25 
2.50 
2.75 
3.00 
3.05 


4.80 
-7.20 
6.35 
11.05 
6.90 
6.95 
6,30 
7.05 
7.70 


The  weakness  in  such  a  plan  is  that  the  rate  of  levy  in 
Column  4  is  forever  advancing  as  the  accumulation  of 
annual  serial  maturities  increase,  and  the  heaviest 
burden  of  redemption  of  present  debt  (with  the  exception 
of  1927)  lies  in  the  period  1937  -  1942,  which  (in  1941) 
will  require  a  6.25  mill  levy,  on  the  then  estimated 
assessed  valuation. 

(See  table  Page  26.) 


39, 


3.      THE  RECOMilMDATION  OF  THE  BURE/.U  OF  MUNICIPAL  RESEARCH. 

In  -the  previous  chapter  several  possible  courses  have  been 

outlined.   Soma  of  the  plans  provide  a  temporary  relief  but  none" of  them 

points  the  way  to  a  pormanont  solution  of  the  problem  confronting  the 

# 

Sinking  Fund. 

A  permanent   solution  should  include  provision  for  the   levying 

of  sufficient  taxes  to: 

a.  Frovido  annual  Sinking  Fund  deposits  required  by  present 
outstanding  Bonds. 

b.  Pay  the  City's  portion  on  all  Special  Assessment   Bonds. 

c.  Pay  for   oach  yoar*s  portion  of  futtiro  Serial  Bonds. 

d.  Replace  the  shortage   in  the  Sinking  Fund  Balance   in  a  manner 
v/hich  vfill  protect  the  debt  and  make  the  burden  of  taxation 
as   light  as- possible.  , 

To  that  end  the  following  plan  is  recommended: 

1.  Adopt  a  classification  shovring  the  term  for  which  bonds  may  be 
issued  for  the  different  public  improvements  to  bo  made  or  asset  to  be 
acquired.       The  New  Jersey  Law  appearing  olscwhoro  in  this  report  iB 
recommended  as  a  basis  for  such  a  classification, 

2.  Provide  that  only  serial  bonds  may  be  issued  in  the  future.     These 
bcaids  should  be  classified  as  per  plan   in  the  preceding  paragraph  and 
to  mature  in  equal  annual  iustallmonte  beginning  one  year  from  date  of 
issue. 

3.  Provide  that  all  Bodies  or  Boards  having  authority  to  plan 
improvements  which  may  call  for  the  issuance   of  bonds,  shall  adopt  a 
plan  covoring  a  three  or  five  year  period  outlining  the  contemplated 
improvemonts  and  their  estimated  cost. 


40. 


4«  Adopt  a  sir.gle  Budget  so  that  all  contemplated  improvements 

v;ith  their  attendant  financial  bui^den  of  interest  and  debt  redecftion 
may  be  considered  :'.n  conjunction  \rita  the  annual  Budget  for  operation 
and  maintenance, 
5«  Provide  for  adequate  debt  redemption  as  follows: 

a#  liake  the  roquii-ed  anm^al  deposits  in  the  Sinking  Fund  based 
on  amortization  tables  as  coiuputed  on  page  20  of  this  report, 
estiinated  under  coluinn  ?  ne:-:t  page. 
b»   In  addition,,   Iot"/  otiq  mill  annually  until  all  the  present 
outstanding  bonds  are  :^odeei;ied,    as  a  special  levy  to  care 
•for  the  present  shortage  in   the   Sinking  Fiindi>       This 
becoires  necessary  in  order  to  provide   su.f  fie  lent  funds  to 
redeem  bonds  as  they  mature,  estimated  ujider   column  5,  next 
p&g«« 
c«  Levy  annually  tlie  ai-nount  necessary  to  redeem  the  iiiaturities 
of  Special   Issue  bonds    (Elwell,   School  Deficit "and  others) 
estimated  under  colui^in  3,  next  page. 
d#  Levy  annually  tho  amount  necessaa^y  to  redeem  the  maturities 
of  future   isGuerj  of  serial  bonds  as   they  fall  duo,  estimated 
imder  column  4.   ne:r:t  page, 
6«  Grant  authority  to  proper  body  to  refund  bonds 

To  carry  out  such  a  plan  will  require  an  anjiu^l  levy  of 
approximately  7»75  mills  as  aigainst  the  4.60  mills  levied  for   1922.     A 
ten-year  table  showing  the  estiinated  necessary  levies  follovTs: 


41. 


TABLE  NO.    11-  SHOVVING  ESTIMTED  LEVIES   TO  FINANCE 
SINKIl'G  FUND  AS   EER   PLAN  RBCOMh/iENDED  BY  THE 
BUREAU  OF  MUNICIPAL  RESEARCH 


Required         Special 
Year  Sinking  Fund       Issue 

Deposit       Ifeturities 
(See  Table  No. 5 _g ,_Z0} 


1923 

4.70 

1924 

4.00 

1925 

3.30 

1926 

3olO 

1927 

2.70 

1928 

2.30 

1929 

2.00 

1930 

1.80 

1931 

1.65 

1932 

1.50 

RESULT: 

2.15 
2.15 
2.15 
2.15 
2.15 
2.15 
2.15 
2.15 
2.15 
2.15 


New 

Depos  it 

Total 

Serial 

For 

Levy 

Maturities 

Sinking  Fund 

In 

Sho?itage 

Mills 

.50 

7.35 

1.00 

.50 

7.65 

1.35 

1.00 

7.80 

1.60 

1.00 

7.88 

1.90 

1.00 

7.75 

2.25 

1.00 

7.70 

2.50 

1.00 

7.65 

2.75 

1.00 

7.70 

3.00 

1.00 

7.80 

3.05 

1.00* 

7.70 

*  Continuance   rcoui/ed  to   1151 


The  above  plan  provides  for  a  ccxnnaratively  even  annual 
levy-  as  the   increase   in  the  annual   levy  for  future   issues   of  serial 
bonds  is  matched  with  the  decreasing  levy  for   present  debt,  -while  the 
peak  loads  in  present  maturities   is  cared  for  by  the   one-mill  levy 
(col.   5). 

The  new  issues  will  be   governed  by  the   increased 
assessed  valuation.     The  figures  are  based  on  an  annual  increase   of 
32?^.        If  the  actual  increase  proves   to  be   in  excess,   it  will  permit 
of   larger   issues   of  bonds ^>  but  it  will  also  provide  a  greater  sum  on 
the  millage   levied  to  care  for  their  redemption. 


42. 


V. 


1. 


2. 


COST  YAUH.TIO-:   OF  CITY  OVTJiiJD  .PROPERTY*. 

OFFICI/.L  R3CCRD  OF  ALL  BONDS    ISSUED  BY 
THE  CITY  OF  MINI.T^POLIS. 


43. 


1. 


COST  VALUATION     OF     lAND,  BUILDINGS     AND     EQUIPtJENT 
As   of  Docombor  31,    1920, 
From  Roco^ds  of  City  Conptrollor. 


Land 

and 

Buildings 

Equipment 

and 
Material 

Total 

GENER.\L  GOVERT^Ti'ETTT 

City  Hall   (Cihy's   Portion) 

1,696,075.50 

228,329.50 

1,924,705.00 

PROTECTION  TO  P3RS0NS 
Firo 
Polico 
Armory 
Building  Inspector 

&  ?R0P?jPTY 
's  Dopt. 

552,150.73 

85,629.32 

287,465.62 

797,772.88 
71,294.65 
10,971.91 
10,748,08 

SANITATION 

Inclnoration  Pla.nt 
Comfort  Stations 
Sewor  System 

&  Station 

173,807.77 
22,398.22 

102,463.19 
13,071,420.33 

22,398.22 
13,071,420.33 

■  HIGHWAYS 

Ward  Warohou.sos                                       138,282.47 

Pavemont,  Curbing,  Trcos 

Sidewalks 

Ward  Machinery  &  Paving  Equipment 

Bridges 

16,883,887.38 

2,983,253.18 

421,165.42 

3,594,318,07 

138,282.47 

16,883,887.38 

2,983,253.18 

421,165,42 
3,594,318,07 

CHARITIES,  HOSPITAL  ^ 
Hospital 
Workhouse 
Charitios 

CORRECT  I03?S 

1,716,557.8^. 

299,641.73 

3,600.00 

61,687,87 
2,010.00 
5,126.84 

1,778,245.71 

301,651,73 
8,726.84 

EDUCATION 
Schools 
Libraries 
Art  Museum 

11,233,467.90 
720,373.08 
843,693.00 

372,651.81 

335,625.19 

10,156.40 

11,606,119,71 

1,055,998,27 

853,849.40 

RECREATION 
Baths 
Parks 

120,455.78 
9,325,079.73 

5,103.78 
249,021,43 

125,559.56 
9,574,101.16 

UTILITIES 

Water  Works 
Wharves 

1,418,310.3a  10,951,029.31 
135,278.51 

12,369,339.69 
135,278.51 

GENERAL 

— .-■ 

36,232.18 

36,232,18 

TOTAIS 

28,772,267.58 

50,204,559.40 

78,976,836.98 

44. 

2,     OFFICIAL  RECORD  OF  /'.LL  BONDS  ISSUED  BY  THE  CITY  OF  MINNEAPOLIS, 


Purpose  of 
Issue 


Appraisal 


Armory 


Date  of 
Issue 

1915 
1917 
19?  9 


1905 


Term 

2&3 
7 
6 


30 


Rate  of 

Interest 

4^ 


Amount 
Matured 

C10,000 


Amount 
Outstanding 


1913 

26 

1914 

30 

Bassett's  Creek 

1915 

12 

1916 

5-25 

1919 

29-30 

1872 

20 

1374 

20 

1875 

30 

1882 

20 

1887 

30 

1889 

30 

1903 

30 

1904 

30 

B  ridges 

1912 

20 

1913 

26 

1915 

30 

1913 

21-30 

1917 

30 

1919 

30 

1919 

29 

1920 

28-29 

1920 

5-30 

1874 

20 

1887 

30 

City  Hall 

1890 

30 

1891 

30 

1892 

50 

Comfort  Station 

1920 

30 

Elec.  Lt.  Plant 

1911 

30 

Falls  Imp. 

1869 

9 

(East) 

1870 

12&15 

Falls  Imp. 

1869 

12&13 

(West) 

1870 

13^15 

1872 

14-X8 

4 

C10,C00 

4 

16,000 
^25,(500 

4 

ri50,COO 

4 

25,000 

4 

50,000 

4 

50,000 

4 

2,000 

48,000 

5 

100,000 
C'27S,oO<5 

8 

250,000 

8 

20,000 

8 

50,000   * 

4% 

76,oc;o 

4 

390,000 

4 

30,000 

4 

50,000 

4 

165,000 

4 

200,000 

4 

650,000 

4 

85,000 

4.15 

100,000 

5 

100,000 

44 

50,000 

5 

100,000 

5 

150,000 

5 

395,000 

■  ^16,000 

2,045,000 

8 

50,000 

4* 

250,000 

4 

200,000 

44 

250,000 

4? 

T?(5,11Ca 

50,000 

5 

50,000 

4 

50,000 

10 

5,000 

10 

10,000 
■  15,000 

10 

30,000 

10 

30,000 

8 

84,000 

T447CX50 


45. 


Purpose  of 

Date  of 

Rat^   of 

Amount 

Amount 

Issue 

Issue 

Term 

Interest 

f.Tatured 

Outstanding 

■  "^       •"~*' 

■     -«•• 

•••■"^  "■"•**'  '    ^  • 

1874 

15 

(i% 

i-   12,000 

.    • 

1882 

20 

4g- 

10,000 

1887 

•30 

4^ 

50,000 

1890 

30 

4 

15,000 

1903 

30 

4 

^     100,000 

1910 

30 

4 

25,000 

1911 

10 

4 

25,000 

1911 

10 

4 

25,000 

Fire  Depart- 

1912 

20 

4 

25,000 

ment 

1913 

10 

4 

25,000 

1913 

26 

4 

25,000 

1914 

30 

4 

25,000 

1915 

12 

4 

25,000 

?.916 

5-   11 

4 

32,000 

1917 

30 

4 

15,000 

1919 

6 

4 

20,000 

^  1^7,000"  ■ 

0  517,000 

Funding 

1919 

6-10 

5 

1,000,000 

General  Funrl 

1907 

30 

4 

100,000 

1892 

30 

4 

25,000 

1893 

30 

4 

75,000 

1911 

30 

4 

400,000 

1915 

5 

4 

125,000 

- 

1915 

26 

•      4 

25,000 

Hospitals 

1914 

30 

4 

75,000 

1915 

30 

4 

47,500 

1915 

12 

4 

100,000 

1917 

7-9-11 

4 

175,000 

1918 

3 

4 

14,000 

1919 

28-29 

5 

175,000 

139,000 

1,097,500 

1885 

30 

4* 

60,000 

Library 

1886 

30 

4 

40,000 

1913 

30 

4 

40,000 

1920 

30 

5 

250,000 

100,000 

2^,OoO 

Lookup 

1887 

30 

4 

30,000 

1913 

26 

4 

15,000 

Municipal 

1917 

7 

4 

15,000 

B  aths 

1919 

15 

5 

25,000 

1920 

5-25 

5 

100,000 
155,006 

46. 


Purpose  of 
Issue 


Date   of 
Irsu: 


Term 


1883 

50 

1884 

30 

1884 

30 

1889 

30 

1892 

30 

in93 

30 

1902 

30 

1907 

30 

1908 

30 

1909 

30 

1910 

30 

Parks         1911 

30 

1911 

30 

1912 

50 

1G15 

5 

191!^. 

26 

191'! 

30 

1915 

12 

1916 

30 

1917 

15&19 

1919 

11 

1919 

12-15 

1920 

3-  6 

1881 

27 

1882 

20 

1883 

30 

1884 

30 

1885 

30 

1887 

30 

1889 

30 

1889 

50 

1890 

30 

1892 

30 

1903 

50 

1904 

30 

Permanent      1907 

30 

Improvement    1908 

30 

19:4 

20 

1911 

30 

1912 

30 

1912 

30 

1913 

7 

1913 

26 

1914 

30 

X9J.5 

12 

1916 

5-29 

1917 

8-  9 

1918 

30 

1920 

6 

1920 

6-30 

Rate   of 
I/iterest 

4|fa 

i 

4 

4 

4 

3* 

4 

4 

4 

4 

4^ 

4 

4 

4 

4 

4 

4 

4 

4 

4 

5 

5 


H 

4$ 

4i 

4-5 

4 

4 

4 

4 

4 

4 

4 

4 

4 

4 

4' 

4 

4 

4 

4 

4 

4 

4 

4 

4* 

5 

5 


Amount 
^fcl^.urod 


Amouiio 
Outstanding 


75,000 


0  200,000 
100,000 
22'S,000 
165,000 

40,000 

20, COO 

70,000 

150,000 

50,000 

.  300,000 

50,000 

150,000 

250,000 

300,000 

50,000 
100,000 
218,000 
275,000 
175,000 
100,000 
300,000 
____  300,000 
763, 060  2,898,000 

40,000 
105,000 
45,000 
175,000 
380,000 
200,000 
170,000 
225,000 
55,000 

187,000 
75,000 
75,000 
400,000 
75,000 
75,000 
75.000 
200,000 
25,000 


50,000 
5,000 

1,450, OOO" 


50,000 

250,000 

75,000 

230,000 

55,000 

175,000 

50,»000 

,4^0,000 

4482,000 


47. 


Purpose   of         Date  of  Rate  '-■;  Anicvr+,  Atiiount 

(«   Ipsue  Issue  Term         Irterest  Matured  Outstanding, 


1887              30                  f^%  %     150,010                   % 

13G3              30                 4  205, fCO 

1809              50                  4  150,000 

4  250,000 

4^  245,000 

4  150,000 

4  175,000 

4  175,000 

4  250,000 

4  250,000 

4  ••                                               100.000 

4  225,000 

4  525^X0 

s     4  50,000 

11,050,000       #r,^rDO,oco  ■ 

Playgrounds           1912             30                 4  .                                              80,000 

Police  Station     1920       10-30                 6  TS^C-OO 

1871             30                 7  125,000 

Railway                 1877             20                 7  125,000 

"260,006 

1914             30                 4  75,000 

River                       1S16             10                4  30,000 

Terminals             1917               5                 4  }}*^^?- 


ISOO 

30 

1391 

30 

'ermanent 

1901 

30 

Improvement 

1903 

30 

Revolving 

1S04 

30 

Fund 

1907 

30 

1903 

SO 

1909 

30 

19]1 

30 

1^:^ 

30 

1913 

5 

48. 


Purpose  of    Date  of 

Pate  of 

Ainourt 

Amount 

Issue 

1 3  s  ue 
1879 

) 

rerm 
20 

Interest 
6 

Matured 
t     40,000 

Outstandin*; 

1881 

12&25 

4 

72,000 

1885 

30 

80,000 

' 

1887 

30 

4 

50,000 

' 

1689 

30 

4 

200, ceo 

13S0 

30 

4 

60,000 

1895 

30 

4 

$100,000 

1896 

30 

4 

100,000 

1897 

30 

4 

200,000 

1899 

30 

4 

200,000 

1903 

30 

3* 

200,000 

1906 

30 

4 

200,000 

1907 

30 

4 

441,000 

1909 

30 

4 

. 

616,000 

1910 

30 

4 

576,000 

1911 

30 

4 

666.400 

1911 

30 

^4 

250,300 

Schools 

1912 

30 

4 

700,000 

1913 

30 

4 

150,300 

1913 

7 

4 

125,000 

1913 

5 

4 

299,500 

1913 

10 

4 

500 

1913 

26 

4 

325,000 

- 

1914 

30 

4 

600,000 

1914 

20 

4 

350,000 

1915 

20 

4 

100,000 

1915 

12 

4 

675,000 

1916 

5. 

-29 

4 

10,000 

390,000 

• 

1916 

SO 

4 

85,000 

1917 

1. 

-29 

4 

112,000 

700,000 

1919 

15. 

-28 

5 

i;§50,ooo 

1920 

6- 

-10 

5 

250,000 

1920 

lO 

-28 

5 

1,250,000 

- 

1920 

2 

-29 

5 

2,000,000 

1921 

1 

-30 

5 

1,230^000 

11,038,500 

C 13, 505, 500 

School  Funding 

1919 

2- 

-  5 

5 

100,000 

300,000 

1871 

25 

7 

25,000 

1872 

30 

7 

25,000 

1882 

20 

44 

50,000 

1886 

30 

4 

35,000 

, 

1887 

30 

4 

150,000 

1888 

30 

4 

90,000 

1908 

30 

4 

500,000 

1911 

30 

4 

275,000 

1912 

30 

4 

175,000 

Sewers 

1913 

5 

4 

150,000 

1913 

26 

4 

150,000  ^ 

1914 

30 

4 

200,000 

1916 

5 

-29 

4 

5,000 

145,000 

1917 

30 

4 

250,000 

1918 

3 

-  9 

4 

9,000 

141,000 

1919 

30 

4* 

200,000 

1919 

30 

5 

100,000 

1920 

1 

-30 

5 

5.000 

145,000 

1921 

1 

-30 

5 

ir^A:6o6 

350,000 
£2.631.000 

Purpose  of 

Date   of 

Rate   of 

Amount 

Mi'nint 

Issue 

Issuo 

Term 

Interest 

ifeitured 

OutstLri3ine 

Sundry- 

1872 

30 

1% 

;..     20,000 

/ 

Pur  poses 

19C8 

30 

4 

t       67,000 

Tax 

1907 

30 

4 

100,000 

Rebates 

1016 

30 

4 

82,000 

1919 

6 

4 

18,000 
^00,000 

Voting 

1903 

20 

4 

116,200 

Machines 

1911 

20 

^- 

42,000 
r5"8,0(X5"" 

1868 

10 

10 

40,000 

1870 

30 

8 

40,000 

1871 

20 

8 

55,000 

1872 

SO 

7 

40,000 

1874 

25 

8 

60,000 

1878' 

3 

7 

50,000 

Water 

1882 

20 

^? 

125,000 

Works 

1883 

30 

4 

414,000 

1885 

30 

4 

30,000 

1886 

30 

120,000 

1887 

30 

4 

330,000 

1888 

30 

4 

170,000 

1890 

30 

4 

50,000 

1895 

30 

4 

200,000 

V 

1897 

SO 

4 

400,000 

1902 

30 

4 

250,000 

1903 

30 

3i 

100,000 

1911 

30 

500,000 

1913 

10 

4 

200,000 

1913 

2 

4 

S00,000 

1915 

12 

4 

100,000 

■1,5"54;(50T)" 

T7750,00(> 

1887 

SO 

4 

30,000 

1915 

5 

4 

27,500 

Workhouse 

1917 

7-8 

4 

25,000 

1918 

5 

4 

25,000 

• 

1919 

6 

4 

30,000 

1920 

3 

5 

35,000 

57,500' 

115,000 

TOTALS 

jD9, 280,000 

a31, 244,200 

Grand  Total 

Bonds 

issued  by  C 

ity   » 1868-1921) 

C.40,524^'200 

50, 


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